Reserve Bank of India (RBI) proposes new standards for classifying, valuing banks’ portfolios
New bank portfolio classification standards will come into effect from April 1, 2023
Mumbai:
The Reserve Bank of India (RBI) on Friday proposed new standards for classifying and valuing banks’ portfolios, aiming to align them with the global prudential framework and accounting standards. maths.
According to the proposed norms, banks’ investment portfolios will be divided into three categories – hold-to-maturity (HTM), available-for-sale (AFS) and fair value through profit and loss accounts ( FVTPL).
In the FVTPL, hold-for-trade (HFT) will be a sub-category in line with the Basel-III framework ‘Book of Exchange’ specifications.
The RBI paper states that the new bank portfolio classification standards will come into effect from April 1, 2023, and invites stakeholders to comment on the matter by February 15.
The proposed new standards aim to bridge the gap between existing guidelines and global standards and practices regarding the classification, valuation and performance of commercial banks’ portfolios.
Existing guidelines regarding prudential standards for portfolio classification and valuation are largely based on the Informal Group Report on Banks’ Portfolio Valuation (Convenor: TC Nair). ), filed in 1999.
The recommendations of this informal group culminated in the issuance of portfolio caution guidelines in October 2002, which form the basis of our current norms.
There have been significant developments in the global safety framework, accounting standards and financial markets – both locally and globally over the past two decades.
The central bank said that while the RBI has adjusted its guidelines to respond to situations as they arise, a comprehensive review has not yet been carried out, leading to a large gap between its standards. country with global standards and practices, the central bank said.
Against this backdrop, a discussion paper on ‘Reviewing the Prudential Standards for the Classification, Valuation and Performance of Portfolios of Commercial Banks’, reviews the rationale and development of the current framework, respective global standards and developments in financial markets before framing its proposals.
The paper proposes to comprehensively align the safety framework with global standards while retaining some factors considering the domestic context. PTI NKD CS HRS now
